PEI 300: Six firms making their mark

The firms from across the PEI 300 that made the headlines this year.

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BlackRock
Ranking: 17 (up 148 places from 2019)
New York

The world’s largest asset manager shot up the ranking, indicative of its push to becoming a force in the world of alternatives.

In Q1 2020 alone BlackRock saw $7 billion of net inflows and capital commitments for alternatives, PEI reported. Between Q1 2019 and Q1 2020, alternatives grew from 2.5 percent to 3.1 percent of the firm’s total assets under management.

“In our illiquid alternatives space, we are actually having deeper, longer, broader dialogues [with investors] than ever before,” said chairman and chief executive Larry Fink on the firm’s first-quarter results call.

In the past five years BlackRock has also held final closes on two Private Opportunities Funds for direct co-investment deals on a global basis, per PEI data. The firm is also known to run several big customised accounts. In March BlackRock hit the two-thirds mark on fundraising for its debut secondaries fund, collecting around $1 billion to invest in LP stakes and GP-led deals.

As of January, BlackRock’s Long Term Private Capital Vehicle had raised $3.85 billion, with the aim of raising $12 billion overall. The fund takes long-duration positions in private companies with less leverage and a lower-than-average fee base. Speaking to PEI in March Dag Skattum, who leads the fund’s Europe business, said: “Long-term and lower-leverage might not be differentiators to everyone; but among family- and private-owned companies, we find the proposition to be particularly compelling, helping deliver unique sourcing opportunities for our investors.”

KPS Capital Partners
Ranking: 69 (Re-entry)
New York

The manufacturing and industrial specialist is back in the ranking with a bang having dropped out of contention last year.

It took KPS less than four weeks to pull in $7 billion across two funds last year. In fact, throughout the firm’s history it has turned down more capital than it has closed on, despite having carry set at 30 percent – a testament to its impressive performance record.
Founder Mike Psaros describes the firm’s strategy as “based on seeing value where others do not”.

“That is key: buying right and then making businesses better. Our investment strategy fundamentally transforms companies, not balance sheets.”

As the world grapples with the pandemic, a strong focus on operational improvements – and KPS’s ability to make all-equity deals, as it did successfully following the GFC – puts the firm in a good position when it comes to deploying the $6 billion KPS Special Situations Fund V.

Psaros says even though the firm’s strategy and focus will remain the same, it will likely benefit from lower valuations brought about by market uncertainty, the general lack of available financing for new acquisitions, and the first opportunities in a long time to acquire assets through bankruptcies and financial restructurings.

“I would fully expect during the course of this downturn that we will acquire companies that would have otherwise gone out of business, thereby preserving them as a going concern, as well as employers of large groups of people.”

 

Primavera
Ranking: 101 (up 61 places from 2019)
Beijing

A bumper haul last year has made the growth capital specialist one of China’s largest firms.

Primavera Capital Group’s ascent in the rankings comes as little surprise given its recent success on the fundraising trail.

The Beijing-headquartered firm closed its third fund on $3.4 billion in November, which, at $600 million north of its target, was the second-largest ever raised by a domestic private equity manager. Fund III helped propel Primavera up 61 places in this year’s PEI 300 to also become the second-highest China-headquartered firm, behind only CITICPE.

Primavera was launched in 2010 by a cadre of former Goldman Sachs executives. Founder Fred Hu was previously chairman of Greater China for the investment bank and three of his partners at Primavera were former managing directors there.

The firm targets control-oriented and growth investments in the consumer, TMT, financial services, education and healthcare sectors, either in China or cross border with a China angle. The firm had already begun putting the vehicle to work at the time of final close, having backed logistics affiliate Cainiao Smart Logistics Network, online residential marketplace Danke Apartments and e-commerce platform Xingsheng Youxuan, among others.

Notable deals over the past five years include backing the spin-off of Yum China – which owns the country’s KFC and Pizza Hut chains – from its parent in 2016 and participating in a $14 billion Series C funding round for Ant Financial in 2018.

 

Deutsche Beteiligungs AG
Ranking: 172 (up 98 places from 2019)
Frankfurt

DBAG gathered €2.7bn across its flagship and co-investment funds as well its expansion capital fund in the five years to March.

German mid-market firm Deutsche Beteiligungs jumped 98 places in the ranking, from 270th in 2019. Key to that is the more than €2 billion of capital the firm has raised across its 2016-vintage Fund VII and 2019-vintage Fund VIII. Both vehicles have a more than 85 percent re-up rate among repeat investors such as BMO Private Equity Trust and ATP Private Equity Partners.

The German-listed manager has longstanding experience investing in industrials companies in the DACH region but has in recent years expanded its investment strategy to include automotive and mechanical engineering, IT services and software, healthcare and telecommunications.

With its latest offering, the firm expects to back more IT services/software and healthcare companies, Torsten Grede, the spokesman of the board of directors of DBAG, tells PEI. The German Mittelstand – small and medium-sized companies – and family succession situations are also speciality areas for the firm.

When it comes to increasing its fund size, DBAG has been quite conservative over the years compared with most of its peers. Grede notes fund size discipline is necessary to successfully execute and deliver returns on the firm’s investment strategy. “If we find a lot of attractive investment opportunities, we would rather go into the next fundraise earlier than expected.”

 

GHO Capital Partners
Ranking: 206 (new entry)
London

The healthcare specialist raised the largest-ever Europe-dedicated healthcare fund in November.

London-based Global Healthcare Opportunities or GHO Capital Partners is one of this year’s new entrants, having raised over $2.2 billion in the last five years to end March 2020.

The less-than-six-year-old firm has made its mark as one of the top GPs to watch in Europe, through its mantra of enabling better, faster and more accessible healthcare.

GHO raised the largest Europe-dedicated healthcare fund in November, gathering more than €990 million from LPs for its sophomore vehicle.

The fund was oversubscribed and is almost 50 percent larger than its 2014-vintage, €660 million predecessor. Capital raised from the vehicle will back healthcare sub-sectors such as outsourced services, pharma and medtech through growth buyouts.

While the firm has a pan-European focus, its transatlantic strategy is a key differentiator. The firm has had success in taking European businesses into North America, the biggest healthcare market in the world, and vice-versa. In fact, GHO’s exits last year from Montreal-headquartered Caprion Biosciences and UK-based Quotient Sciences exceeded return targets.

The specialist manager is also underpinned by a team with operational and healthcare expertise, including execs from American health company Quintiles, as well as PE firms 3i Group and TPG.

 

Arcline Investment Management
Ranking: 285 (new entry)
San Francisco

A huge debut fundraise has propelled this emerging manager into the PEI 300.

Less than a year after setting up shop, San Francisco-based Arcline Investment Management smashed through its $1.25 billion target to close its debut fund on $1.5 billion after just four months in market, landing it squarely in PEI 300 territory.

The firm was set up by former Golden Gate Capital executive Rajeev Amara, who was joined by fellow Golden Gate alums Shyam Ravindran and Alex Iannaccone and Sentinel Capital Partners’ Luke Johnson. The firm will “continue to execute the same strategy developed and employed during the founders’ tenure at Golden Gate Capital”, according to documents from Texas Municipal Retirement System, which committed $50 million to the fund.

Arcline invests in control buyouts of niche mid-market businesses, targeting companies valued at up to $1 billion. A generalist, the firm’s primary areas of interest include industrials, technology, life sciences, speciality chemicals and personal care.

Arcline has wasted no time on the dealmaking front. The firm has already made seven platform investments and six add-ons, including investing in Dark Horse Consulting Group, acquiring a majority stake in cell and gene therapy materials supplier Akron Biotechnology, acquiring engines and power generation systems manufacturer Fairbanks Morse and acquiring Unitec Elevator from Pacific Avenue Capital Partners.